Solar Financing Options: Cash, Loan, Lease, or PPA?

The days of $30,000+ solar systems that only made sense if you paid cash are over. Today's prices and financing options make solar accessible to most homeowners.

But not all payment methods are equal. Here's how each works and who it suits.

Option 1: Cash Purchase

Pay upfront for the entire system. You own everything immediately.

Typical cost: $15,000-$25,000 after the 30% federal tax credit.

Pros

• Highest long-term savings—no interest or payments
• Full ownership means all incentives go to you
• Adds the most value to your home
• Simplest arrangement

Cons

• Large upfront cost
• Ties up capital that could earn returns elsewhere
• You're responsible for any maintenance or repairs not covered by warranty

Best for:

Homeowners who have the cash available, plan to stay in their home long-term, and prefer ownership over payments.

The math

A $20,000 system (after credits) saving $1,800/year pays back in about 11 years. After that, you get free electricity for another 15+ years. Total savings: $25,000-$40,000 over the system's life.

Option 2: Solar Loan

Finance the purchase through a lender. You own the system but pay over time.

Typical terms: $100-$250/month over 10-20 years at 3-8% interest.

Pros

• No large upfront cost
• You own the system and claim the tax credit
• Payments often equal or less than previous electric bills
• Adds home value

Cons

• Interest adds to total cost
• Still responsible for maintenance
• Monthly payment obligation regardless of production
• Some loans require home equity or good credit

Types of solar loans

Secured loans: Use your home as collateral. Lower rates (3-5%) but risk to your home if you default.

Unsecured loans: No collateral required. Higher rates (5-9%) but simpler process and no risk to home equity.

Dealer loans: Arranged through your installer. Convenient but rates vary widely. Compare to bank and credit union options.

Best for:

Homeowners who want ownership benefits but can't or prefer not to pay cash. Works well if your loan payment approximates your current electric bill.

The math

A $20,000 system financed at 6% for 15 years: $170/month, $30,500 total paid. If electricity savings are $150/month, you're slightly cash-flow negative but building equity. After payoff, free electricity for remaining system life.

Option 3: Solar Lease

A company installs panels on your roof. You pay fixed monthly rent for the system.

Typical terms: $100-$200/month for 20-25 years.

Pros

• No upfront cost
• Maintenance included
• Predictable monthly payment
• Immediate savings if payment is less than current electric bill

Cons

• You don't own the system or claim the tax credit
• Payments may increase 2-3% annually (check contract)
• Complicates home sale—new buyer must assume lease or you buy it out
• Long commitment with limited flexibility
• Less total savings than ownership

Best for:

Homeowners who want solar without ownership responsibilities, don't have strong tax liability, and prioritize simplicity over maximum savings.

The math

$130/month lease replacing $170/month electric bill = $40/month savings = $480/year = $12,000 over 25 years. Compare to $25,000+ savings from ownership. You save less but avoid upfront cost and maintenance.

Option 4: Power Purchase Agreement (PPA)

Similar to lease, but you pay per kWh generated rather than flat monthly rent.

Typical terms: $0.08-$0.15/kWh for 20-25 years.

Pros

• No upfront cost
• Pay only for electricity produced
• Rate typically below utility rate from day one
• Maintenance included

Cons

• Same ownership limitations as lease
• Rate escalators may exist (1-3% annual increases)
• Home sale complications
• Less total savings than ownership

Best for:

Similar to lease, but better if your usage varies significantly or if you want to pay only for actual production.

The math

If you pay $0.10/kWh and your utility charges $0.16/kWh, you save $0.06/kWh. A 10,000 kWh/year system saves $600/year = $15,000 over 25 years. Less than ownership but no upfront investment.

Comparison Table

Factor	Cash	Loan	Lease	PPA
Upfront cost	$15,000-$25,000	$0-$3,000	$0	$0
Monthly payment	$0	$100-$250	$100-$200	Varies
You own system	Yes	Yes	No	No
Tax credit goes to	You	You	Company	Company
Maintenance	Your responsibility	Your responsibility	Included	Included
Home value impact	Highest	High	Minimal	Minimal
Total savings (25yr)	$25,000-$40,000	$15,000-$30,000	$10,000-$15,000	$10,000-$15,000

Which Should You Choose?

If you have the cash and good tax liability: Buy outright. Highest returns, cleanest ownership.

If you want ownership without upfront cost: Loan makes sense. Compare offers from multiple lenders—rates vary significantly.

If you want simplicity and don't mind lower savings: Lease or PPA can work. Read contracts carefully, especially escalator clauses.

If you're moving in the next 5 years: Cash or short-term loan if you buy. Leases and PPAs complicate home sales.

The best financing isn't always the one with the lowest payment. It's the one that matches your situation, timeline, and priorities.

Common Financing Mistakes

Avoid these pitfalls that cost homeowners money:

Not Shopping Around for Loans

Your installer's financing partner may not offer the best rate. Check with your bank, credit union, and specialized solar lenders. A 1% rate difference on a $25,000 loan saves you $2,000-$3,000 over the loan term.

Ignoring Loan Terms Beyond the Rate

Some solar loans have dealer fees built in—you might pay 6% but the effective rate is higher due to points or fees baked into the loan amount. Ask for the APR (Annual Percentage Rate), not just the interest rate, to get the true cost.

Choosing a Lease When You Have Tax Liability

If you owe $6,000+ in federal taxes annually, a lease forfeits the 30% tax credit to the leasing company. That's $5,000-$8,000 in savings you're giving away. Only choose a lease if you genuinely can't use the credit.

Not Reading Escalator Clauses

Many leases and PPAs include 1-3% annual rate increases. Over 25 years, a 2.9% escalator means your final year payment is more than double your first year. Calculate total lifetime cost, not just year-one savings.

Underestimating Home Sale Complications

Leases and PPAs create liens on your home. Buyers must qualify to assume them, pay them off, or you buy out the agreement at sale. This can delay or complicate sales. If you might move within 10 years, ownership usually works better.

Getting the Best Financing Deal

Follow these steps for optimal results:

Step 1: Check your credit score before applying. Above 720 gets the best rates. If your score is lower, consider spending a few months improving it before committing.

Step 2: Get pre-approved from multiple sources. Your bank, local credit unions, and national solar lenders like GoodLeap or Sunlight Financial. Compare APRs, not just advertised rates.

Step 3: Calculate your tax liability. If you can't use the full 30% credit, consider a loan with lower payments that extend payoff while you claim the credit over multiple years.

Step 4: Read every contract carefully. Understand escalators, transfer clauses, buyout options, and maintenance responsibilities. Ask questions about anything unclear.

Step 5: Factor in the timeline. The 30% federal tax credit expires December 31, 2025. Whatever financing you choose, make sure your system is operational before that deadline.

The Bottom Line on Financing

For most homeowners who can use the tax credit, purchasing (cash or loan) provides the best financial outcome. Leases and PPAs trade some savings for simplicity and zero upfront cost.

The "wrong" choice isn't any particular option—it's choosing without understanding the tradeoffs. A lease might be perfect for someone who can't use the tax credit and wants zero hassle. A loan might be perfect for someone who wants ownership without depleting savings.

Run the numbers for your specific situation. And whatever you choose, act before the 30% federal credit expires. That deadline matters more than any other factor in your financing decision.

Financing Timeline Checklist

To claim the 30% tax credit before December 31, 2025:

• Spring 2025: Start getting quotes and comparing options
• Early summer 2025: Choose your installer and financing
• Mid-summer 2025: Complete paperwork and permits
• Fall 2025: Installation and inspection
• Before December 31: System operational and connected

Don't wait until fall to start the process. Permitting and installation take 8-12 weeks in most areas. Longer in busy markets or jurisdictions with complex permit requirements.

Your financing choice doesn't affect the timeline much—loans typically approve in days, and leases/PPAs are similarly quick. The installation process is the same regardless of how you pay.

Start now, choose wisely, and capture that tax credit before it disappears.

After Installation: What to Expect

Your financing choice affects your post-installation experience:

Owned systems (cash/loan): You handle maintenance and warranty claims directly. Most issues are covered under warranty, but you're the point person for coordinating service.

Leased/PPA systems: The company handles all maintenance and monitoring. You pay your monthly amount and they take care of everything else. Less control but less responsibility.

Regardless of financing, monitor your system's production. A good monitoring app shows daily, monthly, and annual production. Compare against projections to catch issues early.

Your financing decision sets the stage for the next 25 years. Take time to understand the tradeoffs, run your specific numbers, and choose the option that matches your priorities and financial situation.